Canadian Mining Journal

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COMMENT: New chapter for Canadian diamonds?



Rough diamonds from the Diavik mine. (Dominion Diamond Corp.)

This writer has a fondness for Canadian diamonds, as do many CMJ readers. The stones are beautiful, world famous and conflict free – an excellent accomplishment for a sector that didn’t exist 35 years ago.

But could the Canadian diamond industry go the same way our nickel producers did – into foreign ownership?

The Washington Companies have expressed interest in acquiring Dominion Diamond Corp., owner of Canada’s first producer, the Ekati mine, and 40% owner of the Diavik mine (along with Rio Tinto). WashCorps made an offer on March 19 of US$13.50 per share for Dominion in a deal worth US$1.1 billion.

WashCorps, controlled by Dennis Washington, has interests in rail and marine transportation and heavy equipment distribution as well as mining. News of the offer pushed Dominion shares up almost 23%. WashCorps went public with its offer, saying that the Dominion board has been preventing Washington from performing due diligence on the object of its desire.

Dominion has acknowledged receiving an unsolicited, conditional and non-binding expression of interest from WashCorps on Feb. 21. After assessing what it calls a “three-page, mostly boilerplate letter”, the board says it invited WashCorps to present an expression of interest at an in-person meeting of the full board. Until that happens, Dominion will continue to resist allowing WashCorps access to its confidential information.

“While the board has repeatedly offered to constructively engage with WashCorps on customary terms, WashCorps continues to demand, as a condition to any discussions, a lengthy period of exclusivity, as well as the ability to veto the board’s choice of new CEO,” Dominion said in a March 19 release. “WashCorps has also refused to accept a customary form of standstill that would restrict it from using the confidential information to acquire control of the company.”

So there we have an impasse, but the situation could change quickly.

Nor is Dominion the only diamond miner to become the object of a takeover. There are rumours that someone would like to get its corporate hands on Stornoway Diamond Corp., too. That situation has yet to be confirmed. But more probable is news of a merger between Dominion and Stornoway. Evidently talks have been underway for a few months. Such a deal would have my whole-hearted support.

Kennady Diamonds appears to be targeted by “certain interested parties”. The company has struck a special committee of independent directors to consider a “potential strategic transaction”. Kennady said no further information would be forthcoming unless there is a material change. The Kennady North project is not yet in  production, but it is in the bulk sampling stage.

Could it be a single foreign investor (WashCorps) desires to own all of Canada’s diamond companies? Are there suddenly several suitors wanting to bid on our young and shining diamond sector?

This writer would be deeply saddened if all Canadian diamond mines became owned by foreign interests.

It’s been 10 years since Falconbridge and Inco were snapped up by Glencore (then Xstrata) and Vale, respectfully. Canadians are still stinging from the loss of our world leadership position in nickel production. We still produce it, but the profits go elsewhere. Those profits include not only cash from the metal sold but the innovation and proprietary technology that generate worldwide acclaim.

The world-leading Canadian potash industry is still in Canadian hands, thanks to the Saskatchewan government that said no to a proposed takeover by BHPBilliton of Potash Corporation of Saskatchewan in 2010.

Are the other provincial and federal governments prepared to allow Canadian diamond mines to thrive under Canadian ownership?